Market nonchalance to poor data continues

15.14 AEST, Monday 10 September 2012

Market nonchalance to poor data continues

By Tim Waterer (Senior Trader, CMC Markets)

Financial markets have adopted quite a nonchalant approach when it comes to seeing dismal economic data in recent times. Pear-shaped macro indicators are brushed aside in the belief that central banks stand at the ready to ease the pain with fresh bouts of stimulus. It has not quite gotten to the stage where bad news is welcomed with open arms but traders are not exactly getting too down in the dumps on signs that the US jobs market is approaching stall-speed, mainly on the belief that Bernanke will have his hand forced in regards to injecting QE3.

However with the market saviour otherwise known as QE3 not due to make a possible appearance until later in the week we could be in for some indifferent trading days in the interim. Traders will be apprehensive about taking long USD positions until we see just what Bernanke may (or may not) have in store.

Everything has been coming up ‘Euro’ of late from the ECB bond-buying plan to the US jobs report implying imminent QE3. A EURUSD rate of 1.30 would have seemed laughable little over a month ago however with 1.28 having already been hit it now seems very plausible. If the Fed pull out all the stops and announce comprehensive easing later this week the Greenback will have further to fall and 1.30 would not be beyond the realms of possibility.

Some trading reluctance to touch the US Dollar ahead of the FOMC statement later in the week has opened the door on the upside for the AUD. The extent of any easing measures announced by the FOMC will have a large bearing on how much time if any the AUDUSD spends above 1.04 in the next seven days.

The Chinese Trade Balance data (released today) took a little steam out of the AUD with the drop in imports (-2.6%) overshadowing the better looking overall number. The softer imports fall in line with recent Chinese indicators pointing to domestic weakness, so this was enough to dim the mood on Asian markets in afternoon trading.

The performance of the Australian sharemarket was nothing to write home about on Monday, with the mining stocks seemingly the only ones finding something to cheer about given the better showing from commodity prices. A slight move higher in the Iron Ore price and the fiscal stimulus package announced by the Chinese government on Friday also propped up the big mining stocks. Gold shares were among the day’s stand-outs, following the surge in the price of the precious metal in anticipation of more monetary easing from the US Federal Reserve. Apart from the moves higher by the miners, the broader market was in slumber mode to start the week with traders mostly non-committal in nature until we hear from Ben Bernanke later in the week. The potential onset of US stimulus really does hold the key for any designs the ASX200 may have on making a sustained run through the 4400 level.

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